Holiday accrual

[dang65]

I've just been defending umbrella companies on another thread, but that's not to say I don't have plenty of doubts about them too. The latest trick my one is pulling is to tell me I have to deduct a holiday accrual amount out of my gross pay each month.

As an umbrella company, we are obliged to satisfy employment legislation relating to holiday pay. In order to facilitate this, we will be making a holiday pay accrual equating to 8% of all contract income earned. This accrual is your money, and will be paid back to you as unpaid salary when you state on your timesheet that you have taken a holiday, at the end of your contract or at the end of the holiday year (December 31st). Holiday pay is also subject to income tax, and Employee’s and Employers’ National Insurance.

Apparently I should have been doing this for the last couple of years, but it somehow got "overlooked".

Has anyone else come across this requirement, and is there any way out of it? I asked them where this money goes while it's being held on my behalf, and the guy I spoke to went, "Er, into the bank somewhere... I think", which sounds a bit vague. I get the money back of course, but I'd like the option of putting it in a high interest bank account of my own choice in the meantime.

I can't seem to find any information about it on the web either at the moment. Be interested to know if anyone else has experience of this.

[ladymuck]

I haven't had any experience of this but it certainly sounds suss to me.

If you were a temp, employed by Kellys or Office Angels for example, you would get paid the rate they agreed with you and if you take holiday they pay you accordingly. It is my understanding that the cost would be recouped from the rate being charged to the client.

As a permie, you get paid regardless of whether you are at work or not (sickness not included!), so there is no deduction at source here either. It is deemed a cost to the business.

Basically, as a contractor, you are paid over and above the permie rate to tide you over when you are resting between contracts. You wouldn't deduct a % from the salary you pay yourself.

I used JSA for a short while before setting up my own Ltd Co and there was no mention from them about holiday pay. They just paid me what I was owed from the agency, less the usual deductions. I took time off during that period and just received less money, as one would expect.

[dang65]

It is deemed a cost to the business.

I suppose I'm considered to be the business as well as the employee though, same as paying Employee's and Employer's National Insurance.

I wish I knew where to find definitive information about this business of being "obliged to satisfy employment legislation".

[malvolio]

Ah, now that would be telling....

Hint : www.pcg.org.uk

[Miler]

Holiday Accruals

Why should an umbrella hold money in your 'holiday fund'?

You are employed by the umbrella company and, as such, are entitled to employee benefits like every other permanent employee. For example, holidays/sick pay/payment of notice period etc.How can the umbrella pay this if you take every penny out each month?

The IR grants expenses dispensations to companies to save them from having to keep and record daily expenditure. They don't grant them to payroll companies who quite blatantly do no more than process invoices for a small fee.

An 'umbrella' that offers a true Employment Management Service for its employees MUST retain a small fund to cover the employee's benefits. This is required to fit in with IR guidelines. If they don't, then they will have their dispensations revoked and YOU will be chased for tax on the non-receipted expense claims you submitted.

An umbrella that just factors timesheets will not survive any IR inspection.

[dang65]

You are employed by the umbrella company and, as such, are entitled to employee benefits like every other permanent employee. For example, holidays/sick pay/payment of notice period etc. How can the umbrella pay this if you take every penny out each month?

So are you saying they're right and I should be paying into the pot each month? It's just that I'd not come across this as a legal requirement before, even from the umbrella company I've been working to for the last five years. And I can't find any reference to it on other brolly co websites either.

[Miler]

Of course it's right.

The pot should have a set limit to cover the basic entitlements, and you SHOULD receive interest on your held amount.

This is actually a company that sounds like they finally understand how an Employment Management Company should be run.

[dang65]

This is actually a company that sounds like they finally understand how an Employment Management Company should be run.

Yes, it's a terrible nuisance!

[anewcontractor]

Prosperity4 do something like this, someone told me that this was not right but not sure as they seem to get away with it. They put into a fund and you used to be able to claim it back whenever but now you have to actually give notice of sick or holiday, to get your own money back! Its mad! They have about 1000 people on their books, so you do the math, someone is earning a lot of interest!